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Politics : American Presidential Politics and foreign affairs -- Ignore unavailable to you. Want to Upgrade?

To: DuckTapeSunroof who wrote (45519)	9/1/2010 7:02:12 PM
From: TimF	Read Replies (1) \| Respond to of 71588

Re: [We know that higher income households are more likely to bank the cash than spend it.] "No we don't know that." Actually, (in the aggregate), we DO KNOW THAT. IF by "in the aggregate" you mean that a larger percentage of their income is saved or invested rather than spent (ignoring the point that a lot of investment is spending and considering only consumer spending), then your right. But that's not an issue that matters (and wouldn't be even if the problem with the economy was too low of demand from consumer spending). The issue that would matter would be the marginal propensity to save or spend the additional dollar. We don't know if the rich are more likely to save the marginal dollar. It might be (at least if you define paying down debt as saving) that the more strapped less wealthy would take any extra money they earn and use it to improve their deteriorated financial condition, or if they are a little better off, save or invest it so they have a cushion in case things get worse. The rich probably already have a cushion. And that's even assuming that more consumer spending is the main thing we need, which is itself questionable. Extra investment itself represents demand on resources (directly in terms of investing in business expansion, indirectly in terms of securities investment), and its investment that is well below the pre-financial crisis levels, not consumer spending.